KBR Wins $77M Honeywell Contract, Boosts Government Unit

KBR, Inc. (NYSE:KBR) has received a 10-year contract from Honeywell (NYSE:HON) Aerospace to provide logistics services to the U.S. Air Force at the Hill Air Force Base Depot in Utah. This sole source contract is valued at a firm fixed price of $77 million.

Per the deal, KBR — as a subcontractor to Honeywell — will support the secondary power systems for the U.S. Air Force's F-15, F-16, A-10, B-1B, B-2, C-130 and E-3 aircraft, along with their ground based auxiliary power systems.

Notably, it will provide program management, engineering expertise, supply chain management and kitting, in order to ensure the maintenance of power systems to meet warfighter needs. KBR will continue to assist the Air Force in increasing aircraft availability and reducing depot turnaround time. Markedly, the said contract is a follow on to the deal that was initiated in 2007.

The company’s Government Solutions business, accounting for 72.7% of revenues, has been serving the U.S. Air Force, Army, Navy, Marine Corps, and other federal agencies and foreign allies over the past several years. Its sustainment engineering solutions help these agencies to enhance life cycle costs, improve operational readiness, drive innovation, and ensure mission success on land, in air, at sea, and in space and cyberspace.

Government Solutions Unit Serves as a Boon

KBR has been riding high on the Government Solutions business. The business performance is exceeding market expectation, which is adding to KBR’s bliss. In second-quarter 2019, the company reported strong results, buoyed by continued solid organic growth in Government Services and Technology businesses.

Particularly, in the Government Solutions business, revenues improved 30% year over year in first-half 2019. Organic sales in the said business recorded 22% and 16% growth in the first and second quarters of 2019, respectively. Its continued industry-leading organic revenue growth was underpinned by new work awarded under the portfolio of well-positioned contracting vehicles and on-contract growth across the logistics business.

Price Performance

Shares of KBR, which shares space with AECOM (NYSE:ACM) , Jacobs Engineering Group Inc. (NYSE:JEC) and Altair Engineering Inc. (NASDAQ:ALTR) in the Zacks Engineering - R and D Services industry, have broadly outperformed its industry and the S&P 500 composite so far this year. The stock has gained 67.1% compared with the industry and S&P 500’s growth of 15.2% and 9.8%, respectively. Estimates for 2019 have moved 0.6% upward over the past 60 days, reflecting analysts’ optimism surrounding KBR’s earnings growth potential.

The price performance of this Zacks Rank #2 (Buy) company was mainly backed by solid earnings surprise history, having surpassed the Zacks Consensus Estimate in eight of the trailing nine quarters. The contract winning spree underscores the company’s proven ability to safely and efficiently deliver projects in operating facilities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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